WASHINGTON (Reuters) – U.S. job growth increased more than expected in April, underscoring the economy’s strong fundamentals despite a contraction in gross domestic product in the first quarter.
Nonfarm payrolls rose by 428,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for March was revised slightly lower to show 428,000 jobs added instead of 431,000 as previously reported.
Economists polled by Reuters had forecast payrolls rising by 391,000 jobs. Estimates ranged from as low as 188,000 to as high as 517,000. The unemployment rate was unchanged at 3.6%.
“It is ambiguous whether larger employment gains would be a cause for concern for the Fed or a source of relief,” said Lou Crandall, chief economist with Wrightson ICAP in Jersey City.
“Stronger growth that reflects a willingness by individuals to return to the workforce would tend to dampen labor costs, while growth induced by higher wage offers by employers pinched by labor shortages would have the opposite effect.”
The Federal Reserve is trying to tighten monetary policy to bring down inflation without tipping the economy into recession.
The U.S. central bank on Wednesday raised its policy interest rate by half a percentage point, the biggest hike in 22 years, and said the Fed would begin trimming its bond holdings next month. It started raising rates in March. Fed Chair Jerome Powell told reporters that “the labor market is extremely tight, and inflation is much too high.”
Last month’s job gains underscored the economy’s strong fundamentals despite output shrinking in the first quarter under the weight of a record trade deficit.
There were a record 11.5 million job openings on the last day of March, which widened the jobs-workers gap to an all-time high of 3.4% of the labor force from 3.1% in February.
Average hourly earnings increased 0.3% after advancing 0.5% in March. That lowered the year-on-year increase in wages to a still-robust 5.5% from 5.6% in March.
Compensation for American workers logged its largest increase in more than three decades in the first quarter, helping to keep domestic demand supported.
Though Powell on Wednesday said a 75 basis points rate hike was not on the table, some economists believe the Fed could raise its benchmark interest rate above its neutral rate, estimated between 2-3%.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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